Law Firms Key in FTX’s $24 Billion Settlement with IRS

US law firms Sullivan & Cromwell and Landis Rath & Cobb were instrumental as the defunct crypto exchange FTX settled a $24 billion claim made by the Internal Revenue Service (IRS).

Both firms represented FTX in the dispute. Partners Mathew Pierce, Adam Landis, and Kimberly Brown led the case for Landis Rath & Cobb, while the Sullivan & Cromwell team included partners Andrew Dietderich, James Bromley, Brian Glueckstein, and Alexa Kranzley.

The IRS will receive a $200 million claim in FTX’s bankruptcy, which is to be paid within 60 days after the company’s proposed restructuring plan is implemented.

Additionally, the IRS will also obtain a $685 million lower priority claim, which is “payable on a subordinated basis to customers and other creditors” and “to the extent funds are available,” according to a filing by the US Bankruptcy Court for the District of Delaware. This filing was made on Monday, June 3.

FTX previously argued that if a judge upheld the IRS’ claim, it could have prevented customers from being paid. Although FTX disputed the $24 billion claim, it acknowledged the potential for “significant tax liability to the IRS.”

The settlement “provides much-needed certainty as to the magnitude of the IRS claims and allows these Chapter 11 cases to move swiftly toward resolution, thereby enabling the prompt distribution to the debtors’ other creditors and customers,” FTX stated in the filing.

This reference to Chapter 11 cases pertains to filings under Chapter 11 of the US Bankruptcy Code, where a debtor usually proposes a reorganization plan to maintain business operations and gradually pay creditors.

FTX collapsed in November 2022. Earlier this year, Sam Bankman-Fried, co-founder of FTX, was sentenced to 25 years in prison for defrauding customers and investors.

FTX has committed to fully reimbursing its customers.

By fLEXI tEAM